SIRIUS XM Radio Reports Fourth Quarter and Full Year 2008 Results

SIRIUS XM Radio Reports Fourth Quarter and Full Year 2008 Results

- 2008 Pro Forma Revenue of $2.44 Billion, Up 18% Over 2007

- Total Subscribers of Approximately 19 Million, Up 10% Over 2007

- Company Achieves Positive Pro Forma Adjusted Income From Operations in Fourth Quarter 2008

- Liberty Media Investment Completed

- Investor Conference Call Scheduled for Thursday, March 12, 8:00 AM ET

NEW YORK, March 10 /PRNewswire-FirstCall/ -- SIRIUS XM Radio (NASDAQ: SIRI) today announced full year 2008 results, including pro forma full year 2008 revenue of $2.44 billion up 18% over 2007 pro forma revenue of $2.06 billion; total subscribers of more than 19 million up 10% from 2007 subscribers of 17.3 million; and positive pro forma adjusted income from operations in the fourth quarter of 2008.

(Logo: http://www.newscom.com/cgi-bin/prnh/20080819/NYTU044LOGO )

"In the fourth quarter 2008, the company's first full quarter of combined operations, SIRIUS XM made remarkable financial progress," said Mel Karmazin, CEO of SIRIUS. "For the first time in company history, we reached positive pro forma adjusted income from operations of $32 million, as compared with a loss of $224 million one year ago. Fourth quarter 2008 revenue of $644 million grew 16% over the year ago quarter while total cash operating expenses declined by 22%, a clear demonstration of our focus on improving profitability. Despite challenges in the overall economy and in the auto sector, we look forward to continuing to deliver on the synergies of the merger. We are also very pleased to report that we have closed the second and final phase of the previously announced investment by Liberty Media Corporation. These transactions resolve the uncertainty surrounding the company's and its subsidiaries' debt maturing in 2009."

SIRIUS XM ended the fourth quarter 2008 with 19,003,856 subscribers, up 10% from 17,348,622 subscribers at year end 2007. In the fourth quarter 2008, pro forma average revenue per subscriber (ARPU) grew to $10.60 from $10.42 in 2007. The monthly self-pay customer churn rate was 1.8% in the fourth quarter 2008, as compared with 1.7% in the fourth quarter 2007.

Fourth quarter 2008 pro forma revenue was $644 million, up 16% from fourth quarter 2007 pro forma revenue of $558 million. Subscriber acquisition costs (SAC) per gross subscriber addition was $70 in the fourth quarter of 2008, an improvement of 16% over the $83 in SAC per gross subscriber addition in the fourth quarter of 2007.

In the fourth quarter 2008, SIRIUS XM achieved positive pro forma adjusted income from operations of $31.8 million as compared with a pro forma adjusted loss from operations of ($224.1) million in the fourth quarter 2007. The pro forma fourth quarter 2008 net loss was ($248.5) million as compared with a pro forma net loss of ($405.0) million in the fourth quarter 2007. On a GAAP basis, the fourth quarter 2008 net loss was ($245.8) million or ($0.08) per share.

INVESTOR CONFERENCE CALL

SIRIUS XM plans to hold a conference call on Thursday, March 12, 2009 at 8:00 am ET to discuss these results. Investors and the press can listen to the conference call via the company's website, www.sirius.com, and on its satellite radio service by tuning to SIRIUS channel 126 or XM channel 90.

A replay of the call will be available on www.sirius.com.

PRO FORMA RESULTS OF OPERATIONS

The discussion of operating results below is based upon pro forma comparisons as if the merger occurred on January 1, 2007 and excludes the effects of stock-based compensation and purchase accounting adjustments.

FOURTH QUARTER 2008 VERSUS FOURTH QUARTER 2007

For the fourth quarter of 2008, SIRIUS XM recognized total pro forma revenue of $644.1 million compared to $557.5 million for the fourth quarter of 2007. This 15.5%, or $86.6 million, increase in revenue was driven by the net increase in subscribers of 1,655,234 from the fourth quarter of 2007.

Total ARPU for the three months ended December 31, 2008 was $10.60, compared to $10.42 for the three months ended December 31, 2007. The increase was driven by the start of our "Best of" package sales, most of which were at the $16.99 price point, and a lower mix of prepaid subscriptions from automakers in vehicles which have not sold through to end customers. These factors were partially offset by an increase in the mix of discounted OEM promotional trials, subscriber winback programs, second subscribers and a decline in net advertising revenue per average subscriber.

In the fourth quarter 2008, the company achieved positive pro forma adjusted income from operations of $31.8 million, compared to an adjusted loss from operations of ($224.1) million for the fourth quarter of 2007 (refer to the reconciliation table of net loss to adjusted income (loss) from operations). This decrease was driven by the increase in total revenue of $86.6 million and a $219.8 million decrease in operating expenses.

Programming and content costs decreased by 4%, or $3.9 million, over the prior year's quarter as savings began to be realized.

Revenue share and royalties expense decreased by 25%, or $40.8 million, over the prior year's quarter. The prior year quarter included a one time charge of $52 million in connection with the decision by the Copyright Royalty Board in January 2008 setting royalty rates for the performance of sound recordings effective January 1, 2007. Adjusting for this charge, royalties would have been up 10%, or $11.6 million, from the fourth quarter of 2007.

Customer service and billing costs increased 3%, or $2.0 million, from the prior year's quarter, reflecting higher subscriber totals and improved scale efficiencies.

Sales and marketing costs declined 34%, or $42.0 million, over the prior year's quarter due to reduced advertising and cooperative marketing spend, offset in part by higher customer retention spending. Sales and marketing costs were 13% of revenue in the fourth quarter of 2008 compared to 22% of revenue in the fourth quarter 2007.

Subscriber acquisition costs (SAC) declined 27%, or $48.0 million, and as a percent of revenue improved from 32% to 21% over the prior year's quarter. This improvement was driven by 27% lower gross additions in the fourth quarter.

SAC, as adjusted, per gross subscriber addition improved by 16% to $70 from $83 for the three months ended December 31, 2008 and 2007, respectively. The decrease was primarily driven by lower retail and OEM subsidies due to better product economics.

General and administrative costs decreased 20%, or $12.6 million, and declined as a percent of revenue from 12% to 8% over the prior year's quarter, reflecting lower merger costs and savings from the integration of administrative functions.

Engineering, design and development costs decreased 27%, or $3.9 million, due to lower product development costs and merger savings.

YEAR ENDED DECEMBER 31, 2008 VERSUS YEAR ENDED DECEMBER 31, 2007

For the year ended December 31, 2008, SIRIUS XM recognized total pro forma revenue of $2.4 billion compared with $2.1 billion for the year ended December 31, 2007. This 18.4%, or $378.1 million, increase in revenue was primarily driven by a $367.6 million increase in subscriber revenue resulting from the net increase in subscribers of 1,655,234 during 2008.

Total ARPU for the year ended December 31, 2008 was $10.51, compared to $10.61 for the year ended December 31, 2007. The decrease was driven by an increase in the mix of discounted OEM promotional subscriptions, subscriber winback programs, second subscribers and a decline in net advertising revenue per average subscriber.

The company's pro forma adjusted loss from operations decreased ($429.2) million to ($136.3) million for the year ended December 31, 2008 from ($565.5) million for the year ended December 31, 2007 (refer to the reconciliation table of net loss to adjusted income (loss) from operations). This decrease was driven by an 18.4%, or $378.1 million, increase in revenue and a 4.2%, or $129.5 million, decrease in expenses.

Programming and content costs for the year ended December 31, 2008 increased 11%, or $45.2 million, including a one-time payment to a programming provider of $27.5 million due upon completion of the merger. Excluding this one-time payment, programming costs increased by 4% or $17.7 million.

Revenue share and royalties expense increased by 19%, or $74.9 million, over the prior year, maintaining a flat percentage of revenue of approximately 20% in 2008 and 2007.

Customer service and billing costs increased 12%, or $26.8 million, from the prior year due to a larger subscriber base, mitigated by scale efficiencies.

Sales and marketing costs declined 17%, or $70.8 million, due to reduced advertising and cooperative marketing spend, offset in part by higher customer retention spending. As a percentage of revenue, sales and marketing costs improved from 20% in 2007 to 14% in 2008.

Subscriber acquisition costs declined nearly 12%, or $77.6 million, and as a percentage of revenue improved from 32% to 24%. This improvement was primarily driven by a 14% improvement in SAC per gross addition due to improved product economics and lower retail and OEM subsidies. Subscriber acquisition costs also declined as a result of the 5% decline in gross additions in the year.

SAC, as adjusted, per gross subscriber addition improved by 14% to $74 from $86 for the years ended December 31, 2008 and 2007, respectively. The decrease was primarily driven by lower retail and OEM subsidies due to better product economics.

General and administrative costs decreased 2%, or $4.8 million, and declined as a percent of revenue, reflecting one time costs in connection with the merger in the prior year and early integration savings.

Engineering, design and development costs decreased 17%, or $10.4 million, due to fewer OEM platform launches and lower product development costs.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
SUBSCRIBER DATA, METRICS AND OTHER NON-GAAP FINANCIAL MEASURES
(Dollars in thousands, unless otherwise stated)
(Unaudited)

Subscriber Data:
Pro Forma Pro Forma
Three months ended Twelve months ended
December 31, December 31,
2008 2007 2008 2007

Beginning
subscribers 18,920,911 16,234,070 17,348,622 13,653,107
Gross
subscriber
additions 1,713,210 2,336,640 7,710,306 8,077,674
Deactivated
subscribers (1,630,265) (1,222,088) (6,055,072) (4,382,159)
Net additions 82,945 1,114,552 1,655,234 3,695,515
Ending
subscribers 19,003,856 17,348,622 19,003,856 17,348,622

Retail 8,905,087 9,238,715 8,905,087 9,238,715
OEM 9,995,953 8,033,268 9,995,953 8,033,268
Rental 102,816 76,639 102,816 76,639
Ending
subscribers 19,003,856 17,348,622 19,003,856 17,348,622

Retail (131,333) 314,908 (333,628) 791,444
OEM 218,249 791,356 1,962,685 2,860,722
Rental (3,971) 8,288 26,177 43,349
Net additions 82,945 1,114,552 1,655,234 3,695,515

Pro Forma Pro Forma
Three months ended Twelve months ended
December 31, December 31,
2008 2007 2008 2007

Average self-pay
monthly
churn (1)(7) 1.8% 1.7% 1.8% 1.7%
Conversion
rate (2)(7) 44.2% 51.4% 47.5% 50.9%
ARPU (3)(7) $10.60 $10.42 $10.51 $10.61
SAC, as adjusted,
per gross
subscriber
addition
(4)(7) $70 $83 $74 $86
Customer service
and billing
expenses, as
adjusted,
per average
subscriber
(5)(7) $1.18 $1.30 $1.11 $1.18
Total revenue $644,108 $557,515 $2,436,740 $2,058,608
Free cash
flow (6)(7) $25,877 $5,405 $(551,771) $(504,869)
Adjusted income
(loss) from
Operations (8) $31,797 $(224,143) $(136,298) $(565,452)
Net loss $(248,468) $(405,041) $(902,335) $(1,247,633)

SIRIUS XM RADIO INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)

Pro Forma Pro Forma
Three months ended Twelve months ended
December 31, December 31,
(in thousands, except
per share data) 2008 2007 2008 2007

Total revenue $644,108 $557,515 $2,436,740 $2,058,608

Operating expenses:
Satellite and
transmission 22,851 23,697 99,185 101,721
Programming and content 105,215 109,076 446,638 401,461
Revenue share and
royalties 122,711 163,541 477,962 403,059
Customer service and
billing 67,036 65,006 244,195 217,402
Cost of equipment 18,084 37,334 66,104 97,820
Sales and marketing 81,712 123,711 342,296 413,084
Subscriber acquisition
costs 132,731 180,767 577,126 654,775
General and
administrative 51,591 64,223 267,032 271,831
Engineering, design and
development 10,380 14,303 52,500 62,907
Depreciation and
amortization 49,519 75,045 245,571 293,976
Share-based payment
expense 24,945 52,897 124,619 165,099
Restructuring and
related costs 2,977 - 10,434 -
Total operating
expenses 689,752 909,600 2,953,662 3,083,135
Loss from operations (45,644) (352,085) (516,922) (1,024,527)
Other expense (202,649) (52,055) (381,425) (221,610)
Loss before income
taxes (248,293) (404,140) (898,347) (1,246,137)
Income tax expense (175) (901) (3,988) (1,496)
Net loss $(248,468) $(405,041) $(902,335) $(1,247,633)

SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Actual Actual
Three months ended Twelve months ended
(in thousands, except per December 31, December 31,
share data) 2008 2007 2008 2007
(Unaudited) (Unaudited)

Revenue:
Subscriber revenue, including
effects of rebates $565,435 $227,658 $1,543,951 $854,933
Advertising revenue, net of
agency fees 15,776 9,770 47,190 34,192
Equipment revenue 30,712 12,065 56,001 29,281
Other revenue 10,260 323 16,850 3,660
Total revenue 622,183 249,816 1,663,992 922,066
Operating expenses
(depreciation and
amortization
shown separately below) (1)
Cost of services:
Satellite and transmission 24,481 5,175 59,279 27,907
Programming and content 89,214 62,735 312,189 236,059
Revenue share and royalties 103,217 56,762 280,852 146,715
Customer service and billing 67,818 29,288 165,036 93,817
Cost of equipment 18,084 15,886 46,091 35,817
Sales and marketing 80,699 56,866 231,937 183,213
Subscriber acquisition costs 113,512 100,062 371,343 407,642
General and administrative 64,586 37,212 213,142 155,863
Engineering, design and
development 12,404 7,946 40,496 41,343
Impairment of goodwill 15,331 - 4,766,190 -
Depreciation and amortization 82,958 27,638 203,752 106,780
Restructuring and related
costs 2,977 - 10,434 -
Total operating expenses 675,281 399,570 6,700,741 1,435,156
Loss from operations (53,098) (149,754) (5,036,749) (513,090)
Other income (expense)
Interest and investment
income (90) 4,171 9,079 20,570
Interest expense, net of
amounts capitalized (61,196) (19,887) (144,833) (70,328)
Loss from redemption of debt (98,203) - (98,203) -
Loss on investments (27,418) - (30,507) -
Other (expense) income (5,664) 17 (9,599) 31
Total other expense (192,571) (15,699) (274,063) (49,727)
Loss before income taxes (245,669) (165,453) (5,310,812) (562,817)
Income tax expense (175) (770) (2,476) (2,435)
Net loss $(245,844) $(166,223) $(5,313,288) $(565,252)
Net loss per common share
(basic and diluted) $(0.08) $(0.11) $(2.45) $(0.39)
Weighted average common
shares outstanding
(basic and diluted) 3,160,223 1,468,210 2,169,489 1,462,967

(1) Amounts related to share-based payment expense included in operating
expenses were as follows:

Satellite and transmission $1,349 $364 $4,236 $2,198
Programming and content 4,672 2,786 12,148 9,643
Customer service and billing 783 165 1,920 708
Sales and marketing 2,165 539 13,541 15,607
Subscriber acquisition costs - 156 14 2,843
General and administrative 12,995 10,261 49,354 44,317
Engineering, design and
development 2,023 625 6,192 3,584

Total share-based payment
expense $23,987 $14,896 $87,405 $78,900

SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

Actual
(in thousands, except share and As of December 31,
per share data) 2008 2007

ASSETS
Current assets:
Cash and cash equivalents $380,446 $438,820
Accounts receivable, net of
allowance for doubtful
accounts of $6,746 and
$4,608, respectively 102,024 44,068
Receivables from distributors 45,950 60,004
Inventory, net 24,462 29,537
Prepaid expenses 67,203 31,392
Related party current assets 114,177 2,161
Restricted investments - 35,000
Other current assets 58,744 37,875
Total current assets 793,006 678,857
Property and equipment, net 1,703,476 806,263
FCC licenses 2,083,654 83,654
Restricted investments, net
of current portion 141,250 18,000
Deferred financing fees, net 40,156 13,864
Intangible assets, net 688,671 -
Goodwill 1,834,856 -
Related party long-term
assets, net of current
portion 124,607 3,237
Other long-term assets 81,019 90,274
Total assets $7,490,695 $1,694,149
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable and accrued
expenses $877,594 $464,943
Accrued interest 76,463 24,772
Deferred revenue 985,180 548,330
Current maturities of long-term debt 399,726 35,801
Related party current liabilities 68,373 1,148
Total current liabilities 2,407,336 1,074,994
Long-term debt, net of
current portion 2,851,740 1,278,617
Deferred revenue, net of
current portion 247,889 110,525
Deferred credit on executory
contracts 1,037,190 -
Deferred tax liability 894,453 12,771
Other long-term liabilities 43,550 9,979
Total liabilities 7,482,158 2,486,886

Commitments and contingencies - -
Stockholders' equity (deficit):
Series A convertible
preferred stock, par value
$0.001 (liquidation
preference of $51,370 and $0 at
December 31, 2008 and 2007,
respectively); 50,000,000
authorized at December 31,
2008 and 2007, 24,808,959 and
zero shares issued and outstanding
at December 31, 2008 and 2007,
respectively 25 -
Common stock, par value
$0.001; 8,000,000,000 and
2,500,000,000 shares
authorized at December 31,
2008 and 2007, respectively;
3,651,765,837 and 1,471,143,570
shares issued and
outstanding at December 31,
2008 and 2007, respectively 3,652 1,471
Accumulated other comprehensive loss,
net of tax (7,871) -
Additional paid-in capital 9,724,991 3,604,764
Accumulated deficit (9,712,260) (4,398,972)
Total stockholders' equity
(deficit) 8,537 (792,737)
Total liabilities and
stockholders' equity
(deficit) $7,490,695 $1,694,149

SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Actual
For the Years Ended December 31,
2008 2007
(in thousands)

Cash flows from operating
activities:
Net loss $(5,313,288) $(565,252)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 203,752 106,780
Impairment of goodwill 4,766,190 -
Non-cash interest expense, net
of amortization of premium (6,311) 4,269
Provision for doubtful accounts 21,589 9,002
Non-cash loss from redemption of
debt 98,203 -
Amortization of deferred income
related to equity method
investment (1,156) -
Loss on disposal of assets 4,879 (428)
Loss on investments, net 28,999 -
Share-based payment expense 87,405 78,900
Deferred income taxes 2,476 2,435
Other non-cash purchase price
adjustments (68,330) -
Other 1,643 -
Changes in operating assets and
liabilities:
Accounts receivable (32,121) (28,881)
Inventory 8,291 4,965
Receivables from distributors 14,401 (13,179)
Related party assets (22,249) -
Prepaid expenses and other
current assets (19,953) 11,459
Other long-term assets (5,490) 12,109
Accounts payable and accrued
expenses (65,481) 66,169
Accrued interest 23,081 (8,920)
Deferred revenue 55,778 169,905
Related party liabilities 34,646 -
Other long-term liabilities 30,249 1,901
Net cash used in operating
activities (152,797) (148,766)

Cash flows from investing activities:
Additions to property and equipment (130,551) (65,264)
Sales of property and equipment 105 641
Purchases of restricted and
other investments (3,000) (310)
Acquisition of acquired entity
cash 819,521 -
Merger related costs (23,519) (29,444)
Purchase of available-for-sale
securities - -
Sale of restricted and other
investments 65,869 40,191
Net cash provided by (used in)
investing activities 728,425 (54,186)

Cash flows from financing
activities:
Proceeds from exercise of
warrants and stock options 471 4,097
Long term borrowings, net of
related costs 531,743 244,879
Payment of premiums on
redemption of debt (18,693) -
Payments to minority interest
holder (1,479) -
Repayment of long term
borrowings (1,146,044) (625)
Net cash (used in) provided by
financing activities (634,002) 248,351
Net (decrease) increase in cash
and cash equivalents (58,374) 45,399
Cash and cash equivalents at
beginning of period 438,820 393,421
Cash and cash equivalents at end
of period $380,446 $438,820

FOOTNOTES TO PRESS RELEASE AND TABLES FOR NON-GAAP FINANCIAL MEASURES

This press release, including the selected financial information above, includes the following non-GAAP financial measures: average monthly churn; SAC per gross subscriber addition; customer service and billing expenses per average subscriber; free cash flow; average monthly revenue per subscriber, or ARPU; adjusted income (loss) from operations; adjusted net loss; and adjusted net loss per share. The definitions and usefulness of such non-GAAP financial measures are as follows (dollars in thousands, unless otherwise stated):

(1) Average self-pay monthly churn represents the average of self pay
deactivations by the period divided by the average self pay subscriber
balance for the period.

(2) We measure the percentage of subscribers that receive the service and
convert to self-paying after the initial promotion period. We refer
to this as the "conversion rate." At the time of sale, vehicle owners
generally receive between three and twelve month prepaid trial
subscriptions and we receive a subscription fee from the OEM.
Promotional periods generally include the period of trial service
plus 30 days to handle the receipt and processing of payments. We
measure conversion rate three months after the period in which the
trial service ends. Based on our experience it may take up to 90
days after the trial service ends for subscribers to respond to our
marketing communications and become self-paying subscribers.

(3) ARPU is derived from total earned subscriber revenue and net
advertising revenue divided by the daily weighted average number of
subscribers for the period. ARPU is calculated as follows (in
thousands, except for per subscriber amounts):

Unaudited Pro Forma Unaudited Pro Forma
Three months ended Twelve months ended
December 31, December 31,
2008 2007 2008 2007

Subscriber revenue $585,534 $499,109 $2,247,334 $1,879,766
Net advertising
revenue 15,776 20,571 69,933 73,340
Total subscriber and
net advertising
revenue $601,310 $519,680 $2,317,267 $1,953,106

Daily weighted
average number of
subscribers 18,910,689 16,629,079 18,373,274 15,342,041
ARPU $10.60 $10.42 $10.51 $10.61

(4) SAC, as adjusted, per gross subscriber addition is derived from
subscriber acquisition costs and margins from the direct sale of
radios and accessories, excluding stock-based compensation, divided
by the number of gross subscriber additions for the period. SAC, as
adjusted, per gross subscriber addition is calculated as follows (in
thousands, except for per subscriber amounts):

Unaudited Pro Forma Unaudited Pro Forma
Three months ended Twelve months ended
December 31, December 31,
2008 2007 2008 2007

Subscriber acquisition
cost $132,731 $190,090 $577,140 $666,785
Less: stock-based
compensation granted
to third parties and
employees - (9,323) (14) (12,010)
Add: margin from direct
sales of radios
and accessories (12,628) 12,201 (3,294) 40,206
SAC, as adjusted $120,103 $192,968 $573,832 $694,981

Gross subscriber
additions 1,713,210 2,336,640 7,710,306 8,077,674
SAC, as adjusted, per
gross subscriber
addition $70 $83 $74 $86

(5) Customer service and billing expenses, as adjusted, per average
subscriber is derived from total customer service and billing
expenses, excluding stock-based compensation, divided by the daily
weighted average number of subscribers for the period. Customer
service and billing expenses, as adjusted, per average subscriber is
calculated as follows (in thousands, except for per subscriber
amounts):

Unaudited Pro Forma Unaudited Pro Forma
Three months ended Twelve months ended
December 31, December 31,
2008 2007 2008 2007

Customer service and
billing expenses $67,906 $65,991 $248,176 $220,593
Less: stock-based
compensation (870) (985) (3,981) (3,191)
Customer service and
billing expenses, as
adjusted $67,036 $65,006 $244,195 $217,402

Daily weighted
average number of
subscribers 18,910,689 16,629,079 18,373,274 15,342,041
Customer service and
billing expenses, as
adjusted, per average
subscriber $1.18 $1.30 $1.11 $1.18

(6) Free cash flow is calculated as follows (in thousands):

Unaudited Pro Forma Unaudited Pro Forma
Three months ended Twelve months ended
December 31, December 31,
2008 2007 2008 2007

Net cash used in
operating activities $64,195 $30,957 $(403,883) $(303,496)
Additions to property
and equipment (27,846) (18,954) (161,394) (198,602)
Merger related costs (10,472) (6,680) (23,519) (29,444)
Restricted and other
investment activity - 82 37,025 26,673
Free cash flow $25,877 $5,405 $(551,771) $(504,869)

(7) Average monthly self-pay churn; conversion rate; ARPU; SAC, as
adjusted, per gross subscriber addition; customer service and billing
expenses, as adjusted, per average subscriber; and free cash flow are
not measures of financial performance under U.S. generally accepted
accounting principles ("GAAP"). We believe these non-GAAP financial
measures provide meaningful supplemental information regarding our
operating performance and are used by us for budgetary and planning
purposes; when publicly providing our business outlook; as a means to
evaluate period-to-period comparisons; and to compare our performance
to that of our competitors. We also believe that investors also use
our current and projected metrics to monitor the performance of our
business and to make investment decisions.

We believe the exclusion of stock-based compensation expense in our
calculations of SAC, as adjusted, per gross subscriber addition and
customer service and billing expenses, as adjusted, per average
subscriber is useful given the significant variation in expense that
can result from changes in the fair market value of our common stock,
the effect of which is unrelated to the operational conditions that
give rise to variations in the components of our subscriber
acquisition costs and customer service and billing expenses.
Specifically, the exclusion of stock-based compensation expense in
our calculation of SAC, as adjusted, per gross subscriber addition is
critical in being able to understand the economic impact of the
direct costs incurred to acquire a subscriber and the effect over
time as economies of scale are reached.

These non-GAAP financial measures are used in addition to and in
conjunction with results presented in accordance with GAAP. These
non-GAAP financial measures may be susceptible to varying
calculations; may not be comparable to other similarly titled
measures of other companies; and should not be considered in
isolation, as a substitute for, or superior to measures of financial
performance prepared in accordance with GAAP.

(8) We refer to net income (loss) before taxes; other income (expense)
- including interest and investment income, interest expense,
depreciation and amortization, restructuring and related costs and
impairment of goodwill; and stock-based compensation expense as
adjusted income (loss) from operations. Adjusted income (loss) from
operations is not a measure of financial performance under GAAP. We
believe adjusted income (loss) from operations is a useful measure of
our operating performance. We use adjusted income (loss) from
operations for budgetary and planning purposes; to assess the relative
profitability and on-going performance of our consolidated operations;
to compare our performance from period-to-period; and to compare our
performance to that of our competitors. We also believe adjusted
income (loss) from operations is useful to investors to compare our
operating performance to the performance of other communications,
entertainment and media companies. We believe that investors use
current and projected adjusted income (loss) from operations to
estimate our current or prospective enterprise value and to make
investment decisions.

Because we fund and build-out our satellite radio system through the
periodic raising and expenditure of large amounts of capital, our
results of operations reflect significant charges for interest and
depreciation expense. We believe adjusted income (loss) from
operations provides useful information about the operating performance
of our business apart from the costs associated with our capital
structure and physical plant. The exclusion of interest and
depreciation and amortization expense is useful given fluctuations in
interest rates and significant variation in depreciation and
amortization expense that can result from the amount and timing of
capital expenditures and potential variations in estimated useful
lives, all of which can vary widely across different industries or
among companies within the same industry. We believe the exclusion of
taxes is appropriate for comparability purposes as the tax positions
of companies can vary because of their differing abilities to take
advantage of tax benefits and because of the tax policies of the
various jurisdictions in which they operate. We believe the exclusion
of restructuring and related costs and impairment of goodwill is
useful given the one-time nature of these transactions. We also
believe the exclusion of stock-based compensation expense is useful
given the significant variation in expense that can result from
changes in the fair market value of our common stock. To compensate
for the exclusion of taxes, other income (expense), depreciation and
stock-based compensation expense, we separately measure and budget for
these items.

There are material limitations associated with the use of adjusted
income (loss) from operations in evaluating our company compared with
net loss, which reflects overall financial performance, including the
effects of taxes, other income (expense), depreciation and
amortization, restructuring and related costs, impairment of goodwill
and stock-based compensation expense. We use adjusted income (loss)
from operations to supplement GAAP results to provide a more complete
understanding of the factors and trends affecting the business than
GAAP results alone. Investors that wish to compare and evaluate our
operating results after giving effect for these costs, should refer to
net loss as disclosed in our unaudited consolidated statements of
operations. Since adjusted income (loss) from operations is a non-GAAP
financial measure, our calculation of adjusted income (loss) from
operations may be susceptible to varying calculations; may not be
comparable to other similarly titled measures of other companies; and
should not be considered in isolation, as a substitute for, or
superior to measures of financial performance prepared in accordance
with GAAP.

The reconciliation of the pro forma unadjusted Net loss to the pro
forma Adjusted income (loss) from operations is calculated as follows:

Unaudited Pro Forma Unaudited Pro Forma
Three months ended Twelve months ended
December 31, December 31,
(in thousands) 2008 2007 2008 2007

Reconciliation of
Net loss to
Adjusted loss from
operations:
Net loss as
reported $(248,468) $(405,041) $(902,335) $(1,247,633)
Add back Net loss
items excluded
from Adjusted loss
from operations:
Interest and
investment income 90 (6,978) (12,092) (34,654)
Interest expense,
net of amounts
capitalized 71,274 48,703 235,655 186,933
Income tax expense 175 901 3,988 1,496
Loss from
redemption of debt 98,203 728 98,203 3,693
Loss on investments 27,418 3,768 43,517 56,156
Other expense
(income) 5,664 5,834 16,142 9,482
Loss from
operations (45,644) (352,085) (516,922) (1,024,527)
Restructuring and
related costs 2,977 - 10,434 -
Depreciation and
amortization 49,519 75,045 245,571 293,976
Stock-based
compensation 24,945 52,897 124,619 165,099
Adjusted income
(loss) from
operations $31,797 $(224,143) $(136,298) $(565,452)

There are material limitations associated with the use of a pro forma unadjusted results of operations in evaluating our company compared with our GAAP Results of operations, which reflects overall financial performance. We use pro forma unadjusted results of operations to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to Results of operations as disclosed in our unaudited consolidated statements of operations. Since pro forma unadjusted results of operations is a non-GAAP financial measure, our calculations may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP.

About SIRIUS XM Radio

SIRIUS XM Radio is America's satellite radio company delivering commercial-free music channels, premier sports, news, talk, entertainment, traffic and weather, to more than 19 million subscribers.

SIRIUS XM Radio has content relationships with an array of personalities and artists, including Howard Stern, Martha Stewart, Oprah Winfrey, Jimmy Buffett, Jamie Foxx, Barbara Walters, Opie & Anthony, Bubba the Love Sponge(R), The Grateful Dead, Willie Nelson, Bob Dylan, Tom Petty, and Bob Edwards. SIRIUS XM Radio is the leader in sports programming as the Official Satellite Radio Partner of the NFL, Major League Baseball(R), NASCAR(R), NBA, NHL(R), and PGA TOUR(R), and broadcasts major college sports.

SIRIUS XM Radio has arrangements with every major automaker. SIRIUS XM Radio products are available at shop.sirius.com and shop.xmradio.com, and at retail locations nationwide, including Best Buy, RadioShack, Target, Sam's Club, and Wal-Mart.

SIRIUS XM Radio also offers SIRIUS Backseat TV, the first ever live in-vehicle rear seat entertainment featuring Nickelodeon, Disney Channel and Cartoon Network; XM NavTraffic(R) service for GPS navigation systems delivers real-time traffic information, including accidents and road construction, for more than 80 North American markets.

This communication contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the benefits of the business combination transaction involving SIRIUS and XM, including potential synergies and cost savings and the timing thereof, future financial and operating results, the combined company's plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "will," "should," "may," or words of similar meaning. Such forward-looking statements are based upon the current beliefs and expectations of SIRIUS' and XM's management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond the control of SIRIUS and XM. Actual results may differ materially from the results anticipated in these forward-looking statements.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statement: general business and economic conditions; the performance of financial markets and interest rates; the failure to realize synergies and cost-savings from the merger or delay in realization thereof; the businesses of SIRIUS and XM may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected. Additional factors that could cause SIRIUS' and XM's results to differ materially from those described in the forward-looking statements can be found in SIRIUS' Annual Report on Form 10-K for the year ended December 31, 2008, which is filed with the Securities and Exchange Commission (the "SEC") and available at the SEC's Internet site (http://www.sec.gov/). The information set forth herein speaks only as of the date hereof, and SIRIUS and XM disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication.

E-SIRI

Contact Information for Investors and Financial Media:

Paul Blalock
SIRIUS XM Radio
212 584 5174
paul.blalock@siriusxm.com

Patrick Reilly
SIRIUS XM Radio
212 901 6646
patrick.reilly@siriusxm.com

Hooper Stevens
SIRIUS XM Radio
212 901 6718
hooper.stevens@siriusxm.com

Photo: http://www.newscom.com/cgi-bin/prnh/20080819/NYTU044LOGO
Source: SIRIUS XM Radio

CONTACT: Paul Blalock, +1-212-584-5174, paul.blalock@siriusxm.com, or
Patrick Reilly, +1-212-901-6646, patrick.reilly@siriusxm.com, or Hooper
Stevens, +1-212-901-6718, hooper.stevens@siriusxm.com, all of SIRIUS XM Radio

Web Site: http://www.sirius.com/

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